six thirty am in moscow these are your r.t. headlines at least twenty five thousand people take to the moscow streets protesting the results of last sunday's parliamentary vote that gave the ruling united russia party the majority of seats. dreams of a unified europe put into question is the u.k. rejects a new e.u. deal to save the euro and even the other twenty six member countries to settle a plan among themselves. and seeking a solution gazans flee war torn palestine seeking better opportunities in libya

despite that country's still facing a turbulent future this after an escalation of violence over the last two days with three palestinians killed fifteen others wounded. was a report coming up stay with us. max kaiser this is the ca's a report that dirtbag tim geithner is making the rounds again stacey tell me more facts there the central banks and of the governments and there are there to help you got your backs merkel's crisis plan and this was obviously this week's summit yet another summit to save the eurozone but this quote from geithner is what really intrigued me here max financial crises are ultimately resolved when governments and

central banks succeed in creating conditions that make it compelling for investors to take the risk involved in lending to governments and to banks yeah they still operate under this myth that they need to incentivize these so-called investors to take so-called risk this gives the impression that there are individuals or institutions out there with capital and they're just waiting to get a good deal to invest that capital so geithner is not being truthful because if he was he would indicate that there are no solvent investors or banks in the world today they're only possible action is to dodge innocently to use a steve cain word loan out fresh. debt based. silly putty confetti that some call money as

a way to perpetuate their own and grand eyes mint and bonus pool there are no investors furthermore he also uses the word risk which is misplaced because we know that if these so-called investors were ever to lose any of their potential bonus pool money they simply put a gun to the head of these governments and shake them down for more confetti every single word utters is completely wrong but there's also two sorts of investors they're the ones he's talking about the ones that can never lose and that they're ones that only lose the house always wins you invest with any bank and your money is basically there to be hijacked well these aren't the investors you're referring to you're referring to the victims who are being asked to suffer through austerity measures throw economic repression by having their capital and savings stolen in the form of redirection visa v.

zero percent interest rate so they're subsidizing geithner's crony speculator are terrorists. but he also mentions that financial crises are alternately resolved when governments and central banks act so this takes me to this next headline max sprott frustrated with hostage taking paper silver market now there's the silver market issue here but this quote in particular is what he's referring to the central banks and governments taking action over the long term sprott believes that the market has made gold the reserve currency he says i don't care whether the central banks have or governments have but the markets made it the reserve currency central banks have been aiding and abetting that process they're almost making it the reserve currency by their actions not by their statements and when it was a reserve currency silver traded at a ratio fifteen to sixteen to one of the price of gold barracks brought up there in

canada billionaire and also our friend down in mexico hugo salinas price you know who's trying to bring sober back into the mexican economy as a hard currency those two guys can squeeze the u.s. from the north and the south and they can squeeze the us in the fear money shysters and the goldman sachs of the world to death and sprott is the vigilante the gold and silver vigilante with the firepower to do it and i beseech him to pull the pin on the money grenade now he says and we're going to diffract hard money currency standard gold standard anyway he's also referring to the fact that for example the very very very crooked and industrial strength. mafiosos at the cme in chicago keep raising margin requirements so people end up paying more hundred percent cash for their precious metal positions people for example at m.f. global who have their margin accounts ransacked by the folks j.p.

morgan which we now know they stole the money to offset a short summer position they're going to one hundred percent gold in physical gold and gold physical hundred percent paid for cash no margin so you becoming a de facto gold silver star so they're doing the hard lifting for us and there will be forced out out of their windows and they'll do the flying broker routine soon enough now one of the arguments always against holding gold or silver by the likes of warren buffett is that it pays it offers no return japan's gold for bonds offer could boost return by five point nine times japanese finance minister john as zoomie will be rewarding investors who buy reconstruction bonds with half an ounce of gold an added incentive that could boost the return by nearly six times so if you just bought the bonds on offer you would receive approximately fifteen thousand yen back in interest however with this half an ounce gold offer you receive back

eighty nine thousand yen well that's exactly right so as more sovereigns begin to tie their bond markets to precious metals of course that will trigger under game theory a mad scramble for other countries to do the same i predict that a country in two thousand and twelve will offer a gold backed currency outright like eric sprott argued max this is being forced upon the central banks and the governments by their very own actions because in this case japan has the largest government debt in the world so obviously they've reached an end point and that that what they have to incentivize people with actual fish. the real wealth the japanese bond investor has been the most legendary in the world they have helped sustain the largest government debt to g.d.p. in the world now and japan has very little gold bullion they don't hardly any gold

so we're going to get those gold from they're going to have to go in the open market and buy the gold right now which is another big sovereign out there buying gold in the open market but talking about so much paper in the world so much figure out currency so much bond paper in the world that in order to get suckers into the game you've got to give them something real back guess which country has debt of nearly one thousand percent of g.d.p. now most people assume it's japan max but if you check out this chart from morgan stanley lo and behold number one is the u.k. and the reason why banking debt that's four times the size of the g.d.p. of the u.k. that's right the banking dead in the u.k. is four times g d p so we're talking five or six trillion pounds of bank debt in the u.k. on top of the other trillions of debt that the country has anyway sovereign debt now going forward they have very little gold they sold half the gold under gordon

brown so there's no help there and second of all they'll say that this debt is of course balanced in the global debt markets there are counter parties. that are investing back and forth and that there is very little risk tell that to the investors of m.f. global when the counterpart is to simply stole the money when john chorusing reached and stole a few billion dollars. there's no counter parties are going to be there they're going to get none of their money so if you think these banks in the u.k. are not exposed to four times u.k. g.d.p. with absolutely talks of worthless debt oh oh oh oh oh oh oh you've got a big pile of marmite and a book coming your way you mentioned m.f. global and that's in this headline here max kiss the m.f. global money goodbye sources say so m.f. global customers are at the moment expecting to recover about sixty five percent of their funds that's it ok but the article then goes on to say one thing seems to be

certain investigators and banks have had extensive dealings with m.f. global believe whatever money is missing is probably gone forever and won't be able to be returned to investors when the investigation is complete that's because even if customer funds are located if they were used to pay off legitimate claims of creditors those creditors are legally entitled to the money max who's the biggest creditor j.p. morgan and j.p. morgan is the central bank that timothy geithner said is there to save the system so they're there to save this is them by destroying this is sounds like america's approach in vietnam now of course this is also the other thing that puts lie to the whole argument timothy geitner says is that if it's governments and central banks that will restore your trust in the system but they're doing nothing that would suggest that they're anywhere near close that because what you need is the

criminals in jail because why would you go into the system where you might not get your cash deposit back in this case what happens next time the likes of northern rock goes bust and they have loads of law. creditors what if they just took your deposits and said where legitimate legal creditors sorry you had your money in the bank well the only one of all. the fun for gold or s.l. v the exchange traded fund for silver that the backers j.p. morgan and they just be saying we're going to say the exact same thing when you go to get your medal they'll say well we're the creditor the banks. and j.p. morgan are bankrupt now but their creditors are taking your precious metal and collateral and you'll get a receipt for some cash and by the way your cash is now worth ten cents on the dollar so if you have money and those. are s.o.v. you don't have anything you've got a pile enough and you should get out of mediately and buy real physical metal but they understand the central banks and the governments understand why people don't

want to go into the markets and that's because they're likely to be defrauded so here is obama on the campaign trail earlier this week and he said obama seeks stronger penalties for wall street fraud too often he said we've seen wall street firms violating major anti-fraud laws because the penalties are too weak and there's no price for being a repeat offender no more all the calling for legislation that makes those penalties count so that firms don't see punishment for breaking the laws just the price of doing business so they want to increase the penalties from like five bucks to ten yes something you heard on the seventeenth grain of some golf course somewhere before heading to the clubhouse and you know picking up some bribe money from some lobbyist from the banking industry to pay for his reelection the guy words are not worth the toilet paper. well the article points out i mean this is how ridiculous the situation is that people think it's over it exaggeration but listen to this penalties at the moment are limited to the amount of profits made

from the corporate misconduct you know what if all the looters and london had just had to pay back the profits from their looting misconduct there's so clueless and it's so beautiful big. as are heading to the gallows it's going to be full and there saw you mean this in other words these people are saying they're so clueless or so out of touch they don't understand the fire that they're playing with and the show about a blowout on the world see it is going to be entertaining say sierra thanks so much for being on the kaiser report thank you max don't go away much more coming away so stay right there. in the. world with. technology innovation all the developments from around russia we've got the future are covered.

by max keiser welcome back to the kaiser report time now to go to sydney australia and talk to dots this financial commentator saw famous he just goes by that dots dust walk around the kaiser report good to be with you max all right das let's talk about europe you've just read a piece published on john's market watch entitled the what happens in europe won't stay in europe tell us about it the basic thing is in the united states there's a feeling that what's going to happen in europe is going to affect them and i think that's delusionary and there's a few channels of contagion that i think would noting the first is between europe and america they are about forty percent of global economy twenty five percent of

trade and they're each other's lot just pop this in terms of trading so what happens in europe will affect american exports and they export about for. one hundred billion a year which is roughly about twenty percent of their exports the whole thing is the united states and stuff to asia like you know little microsoft programs and sort of intel chips and all that sort of stuff which gets built into products which goes to europe and obviously we all know europe is not going to grow and at best you know they're going to flatline and have maybe low growth but whiskas they fall off the edge of cliff that's going to fix but the united states and it's going to fix china so basically that's a first line of contagion in the united states the second lot of contagion is the very predictable one of the financial markets u.s. banks according to a congressional report have six hundred and forty one billion dollars of exposure to europe that's not all to the governments that's to companies now they say they

have hitches we don't know what they have but let's assume they had to some degree but it's still a pretty big number then of course there are the lovely savings of american retirees some part of that has found its way into europe as well so they've got substantial exposures to europe and to some extent i think barack obama and the democrat administration in the white house spends a lot time worrying about what's going to happen to europe because going to affect what happens the united states and the other thing is all this lovely chatter in europe about let's devalued by printing money and all that sort of stuff that's also going to have an effect on the united states is going to force up basically the u.s. dollar and the export sector in the united states and doing quite well it's growing by eleven percent year on year and that's going to get affected if the dollar value so all this all the sort of contagion is going on i also think a lot of the stuff i wanted to ask if you've taken a look at the united kingdom and all because of all the countries in the world they

are actually in the deepest debt of all their banks are carrying four to five times the country's g.d.p. and unsecured debt as on top of. the notional value of the sovereign debt as well as some other contingent debts they're really the most indebted country the world and the u.k. has taken an adversarial position against europe as because europe was the rewrite their constitution sarkozy and merkel to try to accommodate their reconstruction and re securitization of all this bad debt david cameron in the u.k. saying wait a minute you can't do that so do you see this conflict escalating between the u.k. and continental europe you've got two questions it's a let me answer each in part one is the fairy high level of borrowing by financial institutions and you're absolutely correct the u.k. is one switzerland also interesting enough it's the other one and the argument in defense of that is these are banking sent so they borrow money in and they lend it

out on the other side so you can't really look at the financial system balance sheets but the problem of course banks are highly leave it at it doesn't really matter where the money's coming from and where it's going if the people who actually have taken out the legs that pay back it doesn't really matter whether you're entrepreneur said or you're an entrepreneurial set or you're a bankruptcy because that's what you're going to be because we're going to be bankrupt and that's what we found we had basically the problems of banks like ah b.s. and lloyds in the united kingdom so you're absolutely correct it's the banking sector in that sense which basically acts as this conduit and creates problems but the second question that you ask is an even more fascinating one because there is this sort of power that's taking place between the banks in the suburbs. because the banks have problems because under the basel rules which is the banking regulations sovereigns were treated in a very interesting way sovereign debt was regarded as being wait for it risk free

so if you are and o.e.c.d. country which a country like greece is no bonds were risk free so the banks loaded up on this date on the balance sheet which is of course now toxic and if they would have mocked to market that debt properly in other words take the write offs because we all know that it's not going to be paid back in full so under those circumstances the banks would have solved the shoes so basically they need to get rid of this this sovereign debt off their balance sheet except of course they come because they need capital to do it and they don't have the capital so the other part of this fascinating equation of the moment is a sovereign scott issued it and in part they need the dead curiously enough money to rollover their borrowings but to inject money into the banks to recapitalize them to perversely be able to write off the date which they should in the first place so there's a strange circularity that's going around here and at the moment because countries like italy and spain are having trouble issuing debt they leaning very heavily on the banking system saying buy my debt buy my did but this just makes the problem

worse and the real issue i think in this relationship goes back to a fundamental discussion that you and i have touched on previously which is once you get very large financial institutions in these countries and they dominate the economy in various ways this sort of relationship between the sovereign and the bank it's very deeply embedded and it's very very hard to unwind in any meaningful shape and it's now a serious barrier to resolving the european debt whereas i explained that quite simply because the simplest way to do it is these countries have to reduce the quantum of did which means greece has to write off its debt by say sixty percent and italy might not need sixty percent but twenty or thirty percent said he would go a long way of writing down their stock of dead. well the problem is you can't do that because the moment you do that italian banks and other european banks which oldest it suffer massive losses and basically then you have the insolvency issue of the banks and the sovereign as

a step in any way which makes problem worse and this relationship is very toxic relationship is very dangerous and i think that lies at the heart of trying to resolve this european debt crisis or to actually talk about the circularity that's going on here sovereigns bailing each other out and borrowing from each other to bell each other out in the broader context going but looking at this over a thirty year period let's say when interest rates in the world particularly set by the federal reserve in the united states it's fifteen or sixteen percent this was the beginning of a thirty year bull market in bonds which is the say that interest rates over thirty years have been trending lower and the circularity was able to continue because there was all was a higher bond price to raise the collateral and bail you out but starting in the last few years with interest rates at zero there's no place to go to keep this circularity or as some might call it the ponzi scheme going so central banks are

engaging in things like quantitative easing wentz r. and it sounds to force interest rates below zero but there are limitations to that especially when you're taking it out of the hide of the general population who's now in open revolt so we're at the inflection point now interest rates are at zero you can extend and pretend the ponzi scheme is finished so and it's also revolved around the world the policymakers understand that they've inflamed a global revolution in this way well i think this is the thing that they don't get because i think the key here is that they think they're all powerful and to some extent the lost city is sort of deluded themselves into thinking that because remember we're talking about a period of history. a which really goes back a long way as you say but probably goes back to the postwar era where firstly they did a bit of fiddling on the budgets you know a bit of fiddling on monetary policy and somehow mysteriously you know you could seem to be able to control the economy and obviously once mr greenspan got to power

in the federal reserve in the united states he sort of appeared to be as you remember his nickname was the maestro he could sort of manipulate the economy so they don't actually get the fact that they only have very few policy tools number one the budget well the budget unless you can borrow and spend and now they can't borrow they've got a problem and the other is as you correctly point out monetary policy and once rates go to zero i mean basically all quantitative easing to me is because you can't change the price you change the value that's basically what it is and you're absolutely correct they're running out of runway now and this is the fascinating thing about europe because i hear constantly from people look it's all very simple if they could just print money everything would be absolutely totally fine and i could say well hang on let's back up a stage here the first to gaze if the c.b. could print bonnie does that change the stock of debt in any of these beleaguered economy the answer is no the second how does it help the banks which are holding

this date simply because this we do this to be paid and at some point in time these leverage institutions are going to take a write off and they're not capable of doing that third how does it help these economies grow because we all know we need a bit of growth to get out of this and finally how does it actually not exactly as you say debase the trust that we need to have in the monetary system in the value of the euro to the dollar notes you have so all that breaks a putt that even more important that because you've got these very low levels of interest rates which is zero i suppose the lowest you can go and i bet you anything max the one thing the seabees going to do the next couple of weeks the slush interest rates because we're going to choice. they got to slash interest rates and everybody's rake critical of john crow tree shay but he put up interest rates i think in the back of his mind he knew that the politicians would not make any hard decisions so you used inflation as an excuse to put up interest rates so you could

drop them later if needs be as a sort of you know putting some foam down on the runway but coming back to that low interest rates don't create the right incentive structure to reduced it and that's the critical problem but this is the japan problem you put the interest rates down allowing the government to run up more debt everybody to run up more debt then of course you can increase interest rates because if you increase interest rates you become insolvent even quicker play i mean just start long long and stop and the parts like i'm going to say higher without higher interest rates you don't have the right incentives to reduce the debt i.e. to stimulate and of growth to pay off the debt that seems to be counterintuitive to most people out there they would think that lower interest rates somehow are a greater incentive but that's not true is it does no i don't think so i don't think so and you create all these sort of terrible terrible incentive problems in the economy i'll tell you what they are the first thing is what's the incentive for the mass of the population who have been good and saved what's the incentive for

them to say if you're just basically going to help them because essentially in europe and in the united states these people are earning negative real returns what's the point of saving so basically they should just go and spend their money and trade themselves the mercy of the government which just basically accelerates the bankruptcy process the other thing is if you have really low interest rates you have low cost of capital which means a substitution between capital and labor and the right mix of the two changes in a very adverse way and the two other real issues about that which really i think misunderstood is the massive subsidy to the banking system because if you look at the banking system the deposits are not costing them anything so all they are now incentivized to do is to go and buy government bonds which give a little bit more which are risk free assets and take the carry between the rate on the government. on and the zero cost of their deposits and this is what the american banks have been living off for the last two or three years and so all the wrong incentive structure support in place and that's what we're going to see which

is what i am appalled at this whole idea that people like suckers is pushing all but if the e.c.b. printed money life would actually get better i don't think it will and the devaluation pressures that we actually put on the euro would be offset by the appreciation of the united states dollar and they would basically stuck to print money to devalued so it becomes a racist to no way and i think that's the big problem in all of this all right exactly done throughout time thanks again for being on the kaiser report next it's my pleasure and that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert lifetime i guess das d.a.'s just google it take you right there if you like to send me an e-mail please do so in r t t v dot ru you can follow us on twitter or facebook by just going to kaiser report until next time x. guys are saying by all.